20061219Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DONOVAN E. WALKER
DATE:DECEMBER 19, 2006
SUBJECT:IDAHO POWER'S APPLICATION FOR APPROVAL OF A POWER
PURCHASE AGREEMENT WITH TELOCASET WIND POWER
PARTNERS, LLC., CASE NO. IPC-06-
On December 15 , 2006 , Idaho Power filed an Application seeking approval of a
Power Purchase Agreement (PP A) with Telocaset Wind Power Partners, LLC. Idaho Power asks
that the expenses associated with the purchase of capacity and energy from the PP A be included
in the Company s annual Power Cost Adjustment (PCA).
THE APPLICATION
This PPA is the result ofldaho Power s Request for Proposals (RFP) for 200 MW of
wind-powered generation that originated with the Company s 2004 Integrated Resource Plan
(IRP). Application at 2. The Company issued an RFP for 200 MW of wind-powered generation
on January 2005. Id. In September 2005 , the RFP was revised to ask for 100 MW, instead
of the 200 MW level, because of the quantity of wind the Company anticipated receiving from
PURPA qualifying facilities (QFs). Id. at 3. In June 2006 , Telocaset Wind Power Partners of
Houston, Texas was selected as the preferred bidder of the 2005 Wind RFP process. Id.
Idaho Power and Telocaset concluded negotiation ofthis PP A in December ~006. Id.
at 4. The PP A guarantees an output of 196 000 MWh (annually) has a planned capacity of
100.65 MW. Id. The term of the PP A is 20 years, with an option for Idaho Power to extend the
term of the Agreement an additional 10 years. Id. If Telocaset should wish to sell the facility, the
PP A provides Idaho Power with a first right of refusal. Id.
DECISION MEMORANDUM
The wind project is located in eastern Oregon, and would deliver its energy to a point
on the LaGrande-Brownlee 230 kV transmission line. Id. at 4. The project is expected to have
an output profile with higher output coinciding with the summer and winter peak demand. Id.
Prices under the PP A adjust seasonally and start at a base rate of $48.00/MWh with
an annual escalation rate of 3%. Id. No payment is required for energy deliveries in excess of
the maximum contract amount and Idaho Power will retain all green energy tags from the
project. Id. The PP also provides that Telocaset will deliver detailed forecasting data
including wind velocity and duration, to Idaho Power. Id. The data will include real time access
to the forecasting service used by the project, including forecasts of energy to be delivered
during the next hour, next day, and next week. Id. This is expected to assist Idaho Power when
integrating the wind generation into the Company s resource supply mix. Id. at 5.
The PP A contains provisions, similar to the 90/110 percent delivery provIsIOns
contained in Idaho Power s QF contracts, which would provide for damages and caps. Id. The
PP A also contains penalties should the project fail to deliver the guaranteed annual output of
196 000 MWh. !d. Additionally, the obligations of the project will be secured by a guaranty
issued by Goldman Sachs. Id. Should the credit rating of Goldman Sachs fall below a
predetermined level , Goldman Sachs will be required to post a liquid form of performance
assurance. Id. The obligations ofldaho Power will be secured by Idaho Power s balance sheet.
Id. The PP A also provided for certain "bridge" financing to Telocaset by Idaho Power to cover
Telocaset's cost exposure to acquire certain long lead-time items, such as a transformer and
certain engineering and design expenditures, while the Commission is considering this
Application. Id. at 5-6. Idaho Power states it will establish a reserve account and fund the cost
to enable Telocaset to proceed prior to approval of the Application. Id. at 6.
Idaho Power requests that the Commission issue an order finding that the PP A is
prudent and approving inclusion of the prudently incurred power purchase expenses associated
with the PPA in the Company s annual PCA. Id. The Company requests that its Application be
processed by Modified Procedure. Id.
DECISION MEMORANDUM
STAFF RECOMMENDATION
Staff has reviewed the Company Application and recommends that the
Commission issue a Notice of the Company s Application and establish a deadline for interested
parties to petition for intervention prior to determining whether Modified Procedure would be
appropriate.
COMMISSION DECISION
Does the Commission wish to issue Notice of the Company s Application, and
establish a deadline for intervention prior to determining whether Modified Procedure would be
appropriate? - or does the Commission wish to process this case by Modified Procedure and set
a comment deadline?
onovan E. Walker
DECISION MEMORANDUM